Where do I annotate a older roller in Turbo Tax. I can not find where I enter my 2021 Roth 401K to Roth IRA rollover. I rolled over $34k (of which $24k was contribution) to my Roth IRA. The Roth 401k was opened in 2016 and transfer was 2021, fullfilling that 5 year rule. The Roth IRA was opened in 2008, so fullfilling that 5 year rule. I took a with draw of $34k against the roth IRA in 2023 but can not find anyplace to annotate a $34k roll over into the account (it was shown on my 2021 taxes).
Satisfying either of these 5-year rules is irrelevant if at the time of the distribution from the Roth IRA you were under age 59½. Otherwise, the distribution from the Roth IRA is a qualified distribution and there is no need to know your contribution basis because a qualified distribution is automatically free of tax an penalty.
Assuming that you were under age 59½ at the time of the distribution from the Roth IRA, your $24,000 of contribution basis in the Roth 401(k) became contribution basis in the Roth IRA. Be sure to click the Continue button on the page that lists the Forms 1099-R that you have entered and, when asked, enter or confirm your Roth IRA contribution basis (including the contribution basis from the Roth 401(k)).
Satisfying either of these 5-year rules is irrelevant if at the time of the distribution from the Roth IRA you were under age 59½. Otherwise, the distribution from the Roth IRA is a qualified distribution and there is no need to know your contribution basis because a qualified distribution is automatically free of tax an penalty.
Assuming that you were under age 59½ at the time of the distribution from the Roth IRA, your $24,000 of contribution basis in the Roth 401(k) became contribution basis in the Roth IRA. Be sure to click the Continue button on the page that lists the Forms 1099-R that you have entered and, when asked, enter or confirm your Roth IRA contribution basis (including the contribution basis from the Roth 401(k)).
On my 2021 return it shows the $24k contribution ($34k total rollover), so I should change the box that asks the total life contribtion to include this $24k along with Roth IRA contribtutions? Yes I am under 59.5.
"I should change the box that asks the total life contribtion to include this $24k along with Roth IRA contribtutions?"
Yes.
I have a similar question. In 2022 I rolled over my Roth 401k into a Roth IRA and I also rolled over my 401k in to Traditional IRA. It looks like I never submitted the 1099-R forms in my 2022 tax filing, although I do have copies of the 1099-R forms on my computer. There are no other contributions in the Roth IRA and Traditional IRA other than what I moved over.
In 2023 I withdrew some funds from my Roth IRA (I am in m 30s btw). This amount is less than what I contributed to my Roth 401k (the number in box 5).
Do I need to amend my 2022 tax forms to include the 1099-R forms from when I rolled over the 401ks? Or can I just enter the amount from box 5 of my 1099-R from the Roth 401k as the "Roth Contributions Prior to 2023" and be done with it?
Thank you
Edit:
For clarity my 2022 1099-R from Roth 401k has Distribution Code H in Box 7 (though this form was not included in 2022 tax return)
My 2023 1099-R from Roth IRA has Distribution Code J in Box 7
Both of the rollovers from the 401(k) in 2022 were nontaxable, so there probably isn't much reason to amend the 2022 tax return at this point. I would just enter as "Roth Contributions Prior to 2023" the amount from box 5 of the 2022 Form 1099-R that reports the distribution from the Roth 401k and be done with it.
My apologies for reviving this old thread but it seems to hit my question on the head and want to confirm.
Any Roth Contributions (Not earnings) whether 401k or IRA or 401k rolled into IRA are all available to be withdraw without any penalty or taxes?
From what I read, I can clearly deduce that earnings have the 59.5 age, the 5 year waiting period. However, when it comes to the Roth 401k converted contributions, I have found multiple conflicting standpoints on taxes and the 5 year 10% penalty.
"Any Roth Contributions (Not earnings) whether 401k or IRA or 401k rolled into IRA are all available to be withdraw without any penalty or taxes?"
It depends.
If you have met that age 59½ and 5-year requirements for qualified Roth IRA distributions, any regular (and there for normal) distribution from your Roth IRAs are free of tax and penalty.
If you have not reached age 59½, the amounts of your contributions, conversion and earnings in your Roth 401(k) retain the same nature and add to the corresponding amounts in your Roth IRAs.
If you have met the age 59½ and 5-year requirements for qualified distributions from the Roth 401(k) but have not yet met the 5-year requirement for qualified distributions from your Roth IRAs, the entire amount rolled over to the Roth IRA from the Roth 401(k) becomes contribution basis in your Roth IRAs. In this case, only earnings accrued in your Roth IRAs would be subject to taxes, but not penalty, if distributed before you become eligible for qualified distributions from your Roth IRAs. These earnings come out last.
So if I had original 2k of contributions in my roth ira, then rolled over 27k of contributions from roth 401k plus 16k of earnings for a total of 33k in total rollover value. Does that mean even if I'm not 59.5 and the account is not 5 years old I can pull up to 29k with no penalties or taxes as those contributions were after taxes? Or what applies to the 29k im still unclear...
The rollover to the Roth IRA of the entire balance of the Roth 401(k) would give you a total of $29k of contribution basis in the Roth IRA because the $2k of contribution basis from the Roth 401(k) adds to the contribution basis already in the Roth IRA. Under the Roth IRA ordering rules for distributions, contribution basis comes out from the Roth IRA first, free of tax and penalty.
So to conclude, I have 29k I can withdraw with any penalty or taxes even thought the account is not 5 years old and Im not 59.5? Those only apply for the earnings? The reason I ask is because I may have to buy a roof soon as my insurance only covering repairs not replacement and it's going to be from 10k to 15k.
"I have 29k I can withdraw with any penalty or taxes even thought the account is not 5 years old and Im not 59.5?"
Without penalty or taxes. Because this will not be a qualified distribution, the distribution will need to be reported on Form 8606 Part III to calculate that the taxable amount is zero.
"Those only apply for the earnings?"
What are "those," tax and penalty? If you are under age 59½, the earnings (either those earned in the Roth IRA or those rolled over from the Roth 401(k)), come out of your Roth IRAs last under the Roth IRA ordering rules for distributions and are subject to income tax and, generally, a 10% early-distribution penalty. If your distribution is less than your basis in Roth IRA contributions, you won't be taking out any taxable earnings.
Correct and correct! Thank you so very much for clarying this for me it was a nightmare looking this up online and trying to get the roth 401k contribution clarified once they turned into the roth ira. I could only find contributions that were made directly into the roth ira! What's your current experience and background if I may ask?
Because it's possible to make irrecoverable mistakes related to retirement savings, I've spent many years of reading the tax code and IRS forms, instructions, Notices, Revenue Rulings, Revenue Procedures, Treasury Decisions and Written Determinations related to retirement savings so that I know where to find the answers needed to avoid making such mistakes with my own retirement savings. All of this information is available on the internet.
In your case, the answers to what happens with rollovers from a Roth 401(k) to a Roth IRA are in IRS Treasury Decision 9324 and in the safe-harbor explanation created by the IRS that the 401(k) plan can use provide the required explanation to the individual prior to making the distribution from the Roth 401(k) account. The safe-harbor explanation is given in IRS Notice 2020-62.
Thank you very much @dmertz for sharing your wisdom with the community.
@dmertz wrote:If you have not reached age 59½, the amounts of your contributions, conversion and earnings in your Roth 401(k) retain the same nature and add to the corresponding amounts in your Roth IRAs.
I found what you said about the Roth 401K contributions being treated the same in the Roth IRA account after the rollover in the section "Determination of 5-Taxable-year Period after a Rollover to a Roth IRA" of https://www.irs.gov/irb/2007-22_IRB#TD-9324
If a nonqualified distribution from a designated Roth account is rolled over into a Roth IRA, the portion of the distribution that constitutes a nontaxable return of investment in the contract is treated as basis in the Roth IRA.
However, I couldn't find that the earnings on the Roth 401K become earnings on the Roth IRA. This logic of treating them the same makes sense, but I want to double-check that I am getting things right.
Anything that is not basis must be earnings. There is no other choice.
My biggest thing that I argue is that when you move both the contributions and earnings, you don't pay taxes on the earnings. And then I also transferred the match from my employer which both their contributions and earnings had to pay taxes since theirs are pre taxes. So by that order, the earnings on your own post tax contributions would be the only amounts that once rolled over to the roth ira have not been taxed, correct?
@dmertz wrote:Anything that is not basis must be earnings. There is no other choice.
That's interesting. I thought that the Roth 401K would have contributions, conversions/rollovers, and earnings for a general case.
I am *only* contributing to my Roth 401K through an in-plan conversion: I contribute after-tax dollars to my after-tax 401K, and after the contribution is made, the money is "moved" immediately to my Roth 401K. I used "moved" to avoid using converted or rolled over. So, all the money that has ever entered my Roth 401K has been after-tax.
I was under the impression that all of these "movements" were conversions/rollovers. I just checked my 1099-R, and I see that these contributions are reported as follows:
It looks like I was wrong. The money is being entered into the Roth 401K as a contribution. Is that right?
"I thought that the Roth 401K would have contributions, conversions/rollovers, and earnings for a general case."
Correct. Basis in contributions, basis in In-plan Roth Rollovers, and earnings. Your basis in your designated Roth account in the 401(k) comes entirely from the IRRs and everything else in the account is earnings.
@dmertz wrote:"I thought that the Roth 401K would have contributions, conversions/rollovers, and earnings for a general case."
Correct. Basis in contributions, basis in In-plan Roth Rollovers, and earnings. Your basis in your designated Roth account in the 401(k) comes entirely from the IRRs and everything else in the account is earnings.
Gotcha. So, the basis in contributions and the basis in-plan Roth Rollovers are grouped and considered the basis when the Roth 401K -> Roth IRA happens. Sorry if I sound repetitive, but I want to ensure I got this right.
By the way thank you very much for your help and patience!
Upon rollover to a Roth IRA, basis in regular contributions to the Roth 401(k) becomes contribution basis in the Roth IRA and basis in IRRs becomes Roth conversion basis in the Roth IRA. Earnings remain earnings.
@dmertz wrote:Upon rollover to a Roth IRA, basis in regular contributions to the Roth 401(k) becomes contribution basis in the Roth IRA and basis in IRRs becomes Roth conversion basis in the Roth IRA. Earnings remain earnings.
This is getting a bit dizzy. Previously, it was said that there were only contributions to a Roth 401K, and everything else was earnings. It looks more nuanced than that, so we have contributions, rollovers, and earnings. Is that correct?
The differentiation matters because it affects how the money is withdrawn from the Roth IRA after the Roth 401K rollover is executed. The rules are basically: bucket-1) contributions, then bucket-2) conversions/rollovers (taxable and then non-taxable), and then bucket-3) earnings.
My question is whether my IRR to Roth 401K is considered part of bucket-1 when the rollover to Roth IRA happens, or is it considered part of bucket-2? I think it should be part of bucket-1. Let me provide the evidence that I gather:
I found the following Q & A in the Treasury Decision 9324 (https://www.irs.gov/irb/2007-22_IRB#TD-9324:(
Q-3. For purposes of the ordering rules on distributions from Roth IRAs, what portion of a distribution from a rollover contribution from a designated Roth account is treated as contributions?
A-3. (a) Under section 408A(d)(4), distributions from Roth IRAs are deemed to consist first of regular contributions, then of conversion contributions, and finally, of earnings. For purposes of section 408A(d)(4), the amount of a rollover contribution that is treated as a regular contribution is the portion of the distribution that is treated as investment in the contract under A-6 of §1.402A-1, and the remainder of the rollover contribution is treated as earnings. Thus, the entire amount of any qualified distribution from a designated Roth account that is rolled over into a Roth IRA is treated as a regular contribution to the Roth IRA. Accordingly, a subsequent distribution from the Roth IRA in the amount of that rollover contribution is not includible in gross income under the rules of A-8 of §1.408A-6.
They confirm what you said about the treatment of the rollover contribution money. But there is still a nagging thought in my mind, which is that the contributions to my Roth 401K are solely coming from IRRs, which are reported in my 1099-R as:
So, my Roth 401K has no "direct contributions." It only has IRRs and earnings. I then looked closer at the text: "That is treated as investment in the contract under A-6 of §1.402A-1". I went to the definition of A-6 of §1.402A-1 (https://www.law.cornell.edu/cfr/text/26/1.402A-1) which states the following:
A-6. (a) If a distribution from a designated Roth account is rolled over to another designated Roth account in a direct rollover, the amount of the rollover contribution allocated to investment in the contract in the recipient designated Roth account is the amount that would not have been includible in gross income (determined without regard to section 402(e)(4)) if the distribution had not been rolled over. Thus, if an amount that is a qualified distribution is rolled over, the entire amount of the rollover contribution is allocated to investment in the contract.
They talked about rolling over a designated Roth account to another designated Roth account, which I found weird because the Treasury Decision was talking about rollovers to a Roth IRA. One thing that caught my attention was the following "the amount of the rollover contribution allocated to investment in the contract in the recipient designated Roth account is the amount that would not have been includible in gross income (determined without regard to section 402(e)(4)) if the distribution had not been rolled over. "
I then looked up what Box 5 means (https://www.irs.gov/instructions/i1099r please also append this to the end of the URL#en_US_2024_publink[phone number removed])in my 1099-R, and I found the following:
Enter the employee's contributions, designated Roth account contributions, or insurance premiums that the employee may recover tax free this year (even if they exceed the box 1 amount). The entry in box 5 may include any of the following: (a) designated Roth account contributions or contributions actually made on behalf of the employee over the years under the plan that were required to be included in the income of the employee when contributed (after-tax contributions), (b) contributions made by the employer but considered to have been contributed by the employee under section 72(f), (c) the accumulated cost of premiums paid for life insurance protection taxable to the employee in previous years and in the current year under Regulations section 1.72-16 (cost of current life insurance protection) (only if the life insurance contract itself is distributed), and (d) premiums paid on commercial annuities. Do not include any DVECs, any elective deferrals, or any contribution to a retirement plan that was not an after-tax contribution.
Given that language, the IRRs that I have in Roth 401K are considered contributions, and as such, when the Roth 401K rollover happens, my Roth 401K IRRs will roll over as contributions, too.
Curious to hear your thoughts @dmertz.
"My question is whether my IRR to Roth 401K is considered part of bucket-1 when the rollover to Roth IRA happens, or is it considered part of bucket-2? I think it should be part of bucket-1."
No, it's bucket #2.
The 2007 Treasury Decision that you referenced predates the permissibility of IRRs. Prior to September 28, 2010, rollovers from a designated Roth account could consist only of regular contribution basis and earnings (because prior to that date there could be no basis in IRRs). IRRs became available for only those distribution made after September 27, 2010. See IRS Notice 2010-84 issued after the passing of the law that added IRRs to the tax code.
As I said in my previous reply, basis in IRRs becomes Roth conversion basis in the Roth IRA. Note, however, that your IRR was, absent any investment gains, a nontaxable IRR so that when rolled over to the traditional IRA it becomes basis in nontaxable Roth conversions, nearly equivalent to Roth IRA contribution basis because a distribution of basis in nontaxable Roth conversions is not subject to any early-distribution penalty; only taxable distributions are potentially subject to an early-distribution penalty. Under the ordering rules, though, basis in nontaxable Roth conversions is distributed after basis in taxable Roth conversions from the same taxable year, so if there is any basis in taxable Roth conversions from the same year, perhaps because there was an investment gain prior to the IRR that made some portion of the IRR taxable, the basis in taxable Roth conversions would come out first, potentially subject to an early distribution penalty. After the 5-year clock for the particular Roth conversion basis has run out the penalty on the distribution of that basis in taxable Roth conversions is no longer subject to any early-distribution penalty.